Who Should Run a Company: Owner or CEO?

If a person owns a company, the decision of whether to run it themselves or hire a CEO to take over is complex and often depends on several factors, including their capability, time availability, and the stage of the company's growth.

Role of a CEO

A Chief Executive Officer (CEO) typically works for a Board of Directors made up of investors and other major shareholders. The CEO has the responsibility to ensure that the other executives have the necessary resources, strategic direction, and vision to succeed. This implies that owning a company does not automatically mean that the owner will be the CEO. In fact, it is rare for a single owner to operate every aspect of the business, especially when there are external investors involved.

The Role of the President

In many cases, the president of the company or a hired president runs the business while the owner retains a significant stake in the company. The decision to appoint a CEO often hinges on factors such as the owner's experience, time availability, and the company's growth stage. For instance, in a

Management Roles in Startups

In a startup, it is common for one of the founding partners to become the CEO. These individuals are often technically skilled and driven, but sometimes they lack the necessary skills to sustain long-term leadership. Founding owners may find that they become bored or that their interests shift, and in such cases, it can be beneficial to appoint a professional CEO who has experience in running and managing large companies.

Transitioning Leadership

Handing over the leadership of a business can be challenging, and many business owners have a hard time letting go. They may remain as CEO even after it becomes clear that a professional CEO is needed. It is crucial to consider the best interests of the business in making this decision. Differentiating the roles of shareholder, owner, board director, and employee is essential to ensure that the company runs smoothly and efficiently.

Key Considerations

The decision to have a CEO or run a company personally should be based on a few key considerations:

Ownership vs. Management: Owning the business or being the majority shareholder does not automatically mean that you are the best choice for the CEO role. The CEO should be someone who possesses the necessary skills and experience to steer the company through its growth. Experience and Skills: Founding owners may need to be replaced by a CEO who has a proven track record in managing and growing successful companies. Skills such as leadership, strategic planning, and business acumen are critical. Time Availability: If the owner has other commitments or lacks the time required to manage the company effectively, a CEO is often the better choice. Running a company can be time-consuming, and a professional who can dedicate full-time attention to the business is more likely to succeed.

Conclusion

The choice between running a company personally or appointing a CEO depends on the specific circumstances and the goals of the business. While some owners prefer to take on the role of CEO, others find it more beneficial to hire a professional who can help the company grow and reach its full potential. Ultimately, the decision should be guided by what is best for the business in the long run.